When a company goes bankrupt, its workers suffer, its customers suffer, and certainly its unpaid vendors and creditors suffer. In theory, top executives should be the captain going down with the ship, and while they may already be very wealthy, they should suffer as their company collapses.
It’s hard to compare blue-collar people losing their jobs — and even upper-middle-class white-collar workers being laid off — to millionaires, who might have to cut back on private jets. But when there’s a bankruptcy, the suffering should be spread out.
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For patients and employees of Steward Health Care, there has been plenty of suffering since the hospital chain filed for Chapter 11 bankruptcy in May 2024. The chain owned 31 hospitals across eight states at the time of its bankruptcy.
Many of its hospitals were in bad shape when the decision was made to liquidate the company, and it was not able to find buyers for every location.
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Six of the company’s hospitals have closed for good, while a seventh was closed for nearly two months before a late buyer stepped in. Another facility, which did find a buyer, is also slated to close due to years of neglect at the facility.
Many of the remaining locations have new owners, but the condition of the facilities may not be great, according to a new lawsuit.
Image source: Shutterstock-AnnaStills
Steward sues former CEO in effort to claw back billions
When it filed for Chapter 11 bankruptcy protection last year, Steward placed the blame in a number of places. First, it blamed a slow financial transaction that would have actually just been a Band-Aid, not a solution to its issues.
The company also put some blame on the United States government.
“The other primary factor driving this voluntary Chapter 11 case is, in large part, due to Steward continuing to face challenges created by insufficient reimbursement by government payors as a result of decreasing reimbursement rates while at the same time facing skyrocketing labor costs, increased material and operational costs due to inflation, and the continued impacts of the Covid-19 pandemic,” the company shared.
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At the time, it did not mention any malfeasance by its former executive team. That tune has changed with a new lawsuit it’s bringing against its former CEO, Ralph de le Torre.
“Dallas-based Steward Health Care filed a lawsuit July 15 in bankruptcy court against its former chairman and CEO, Ralph de la Torre, MD, and other top system executives, claiming they conducted insider transactions that drained Steward’s assets and contributed to financial collapse,” Becker’s Hospital Review reported.
Steward CEO led lavish lifestyle
The 68-page lawsuit contains claims of self-dealing, breach of fiduciary duty and fraudulent transfers. It named former Steward leaders, including Dr. de la Torre, former Steward Executive Vice President for Physician Services Michael Callum, First Bristol Corp. Co-CEO James Karam, and former Steward President Sanjay Shetty, MD.
“The lawsuit pointed to an $111 million dividend in January 2021, while Steward was allegedly insolvent, that was allegedly received by Steward board members including Dr. de la Torre, Mr. Callum and Mr. Karam. Dr. de la Torre received $81.5 million of the dividend and used $30 million of it to purchase a ‘superyacht,'” the lawsuit said.
Steward, after it filed for Chapter 11 bankruptcy, has routinely been accused of poor maintenance and bad working conditions at its hospitals. The lawsuit alleges some of the company’s money was diverted to its executive team improperly.
Dallas-based Tenet Healthcare was also listed as a defendant in the lawsuit regarding Steward’s purchase of five Tenet hospitals in Florida for around $1.1 billion in August 2022.
“The lawsuit claimed Tenet’s facilities were initially valued at $895 million by Steward, but a higher price was paid due to Dr. de la Torre’s ‘personal desire to build a hospital empire in the Miami area, rather than on any independent financial analysis,'” according to documents.
There are some other very significant claims in the lawsuit:
- Steward claimed Tenet received a fraudulent transfer in connection with the deal, which included almost $209 million in cash that Steward contributed. It argued that Steward did not receive reasonably equivalent value for the payment and was left with an “unreasonably small capital in relation to its business both before and after making such payment.”
- Steward also claimed that the proceeds of its 2022 value-based care assets sale to CareMax were diverted, with only $60.5 million of the $194 million sale going to the system. It alleged that the remainder went to entities run by Dr. de la Torre and other insiders.
“Dr. de la Torre disputes the allegations of wrongdoing and will vigorously defend himself against them,” a spokesperson for Dr. de la Torre said in a July 16 statement shared with Becker’s.
Related: Vital diabetes care health care brand files Chapter 11 bankruptcy
